Denmark has had a mu-tual fund industry since the 1920s but it wasn't until the abolition of foreign currency regulations in the mid 1980s that activity really took off. Before then, the industry had remained largely low key and almost entirely within the institutional market.
Growth has been fairly dramatic over the present de-cade, with institutional in-vestment declining as retail sales have taken over. As with most European mutual fund industries, much of the driving force behind this change was a falling interest rate scenario, reducing the attractions of bank deposits while enhancing those of funds.
Figures from the Investerings Forenings Radet (IFR-the Danish trade association) show that total assets under management at the end of September amounted to Dkr84.1bn ($12.5bn), al-most four times the amount held at the start of the decade. Despite the growing popularity of equity investment, bond funds remain the biggest selling vehicles in a market dominated by the banking system: the three largest management groups-Danske Invest, Uni-Invest and Jyske Invest - probably account for over 60% of the total between them.
According to Jakob Harder of the IFR, some Danish funds are cross-border marketed but the degree of foreign investment fund penetration into Denmark is insignificant. Domestic retail sales have increased dramatically over the years so that currently only around 15-20% of investment fund assets are owned by institutional investors. Harder says that the institutions use mutual funds largely as portfolio managers in the smaller investment markets.
New legislation coming in-to effect on 1 January will allow the establishment of fund of funds, money market funds and a special fund for investment in small companies. Discussions regarding money market funds have been going on for years, and they are expected to give a further boost to the market. David Hunt